Pawning has a certain reputation from the movies and television, but in real-life it's actually high-end, highly regulated, and surprisingly personal. We sat with Ron, the owner of Palisade Jewelers, and got answers to all the questions people ask.
Q: What do you wish people understood about pawning?
I wish they would understand that so many people do it! It’s a much more common form of getting a short term loan that I guess people would think. It’s also the easiest way to get a loan. That’s why we call it stigma free. No one has to know. It’s private, it’s fast, there’s no effect on your credit score or credit rating, and often times people need a short term loan and they don’t want to ask a friend or a relative. Pawning is the easiest and most secure way of doing that.
Q: Is pawning expensive?
It really isn’t expensive. A $3000 loan for one month costs $135. That’s the price of a good dinner for two. The rate is set by the state at 4.5%, which may seem like a lot on paper, but if you do it for short term and it fills a need, it’s really painless. We’re licensed and regulated by the state of NJ Department of Banking and Insurance.
Q: Do you think attitudes are changing about pawning?
I think there is less of a stigma today, especially among people who work in the business world. People understand that they have to borrow to grow their business, or get through a short term problem. People in banking or real estate or finance, see it as just another way to get some credit. People have assets they can use that are just sitting there.
Q: How is pawning like other types of loans?
People are used to the idea of taking a mortgage on their house or taking a home equity loan to secure funding. Pawning is similar in principle, but a lot simpler in practice. We lend against personal assets like jewelry and watches and diamonds. There are places that loan on boats and wine collections and any material asset that has some resale value.
Q: Is real estate a frequent reason to pawn?
Sure. Pawning is a good way for some people to raise money as a form of a bridge loan while they are waiting to refinance or go through construction. People have used our services and gotten a loan on their jewelry to finance closing costs, especially unexpected closing costs. There may be people who go into closing who have borrowed their maximum mortgage and maybe gotten help from relatives or friends to get through closing costs and all of a sudden something pops up and they have to come up with another $3,000 or $4000 or $5000 to get through closing. Something always pops up. And they are literally maxed out. People ask me, “really? There’s no other way they can get the few extra thousand dollars?” Well, no, they can’t. Everyone has a max. Your max may be $1000 or a million or ten million. But everyone going into a deal has a point where that’s it!
Q: What about other immediate business loans?
I’ve had people who earn very good incomes but get paid infrequently throughout the year. So they may be expecting a quarterly payment, a big check, and by the time the end of that quarter rolls around, they are cash poor. They may be expecting $300,000 to come at the end of the quarter, but right now they don’t have $300 in their pocket. There are insurance executives who get paid twice or three or four times a year. A lot of brokers in some industries have to wait for their income.
Plenty of people in the jewelry business pawn because they have the opportunity to make a big purchase they can make a big profit on, but they don’t have the cash.
Q: Do people pay medical bills with pawning?
We’ve had doctors with independent practices who don't have the backing of a big hospital and they’ve had to go out of pocket for certain drugs, like chemotherapy drugs, and they’re waiting for reimbursement and it takes a long time. And they could be in the hole for 6 figures and need to make payroll. And they don’t want anybody to know. They know the money is coming in, so they get a short term loan.
Q. Who pawns more? Women or men?
I would say as many women pawn as men. We have all kinds of people who pawn. And all sorts of professions. People in government, people who are business owners. Our customers are working people, professional people who need some cash.
Q: Do people pawn over and over?
We have many loyal customers. I have a customer who repeatedly has pawned a watch. He owns an ATM machine business and when he opens a new ATM he has to put money in the machine. Sometimes he doesn’t have the cash flow to do that. He’ll take a one month loan for $10,000, costs him $450. To get that machine up and running, it’s worth it to him. Pawning helps grow business.
Q: Would you advise someone to invest in a high end item to have handy for pawning?
I don’t know about buying something just to pawn it, some people think of things that way, and it’s good to know that you have something you’re buying and using that can be pawned. I had a guy who got an $8000 loan to help his kid with tuition. It cost him $360 and three weeks later he redeemed it. He had a nice watch that was either a gift or he had purchased at some point, but then he didn’t have the cash on hand when he needed it. So a pawn loan was a bridge loan for him. You can’t do that with your car and then just get it back.
Q: So how should we think about pawning?
It’s a great short-term option for quick money. It’s maybe not the best long term option. If you want something to create cash flow for you and you don’t want to sell it, pawning is a great option. And you can redeem it when you’re ready and renew the loan every 3 months.
If you can get a home loan at a few percentage points, that’s great. But what if you don’t have time to go through the approval process and wait for it?
Q: Why pawn? Why not just use a credit card?
Pawning may be lower interest than a credit card – plus there are no extra fees and it’s cash on hand. If you write out one of those checks from a credit card company, they may charge you a fee, they may pay off the low interest loans while the higher interest you owe racks up interest.
Q: How has pawning changed with time?
I think pawning has always been there and always will. It’s very steady. People pawn in good times and in bad times. That same need is always there. A traditional pawn shop would loan on fur costs or electronic equipment, but that’s not our expertise. We loan on jewelry, watches and diamonds.
Q: Do you get a higher level of pawn customer because you don't look like the movie cliche?
I hope everyone feels welcome here. What has changed over time is that we still might make a few hundred dollar loan on a gold chain, but I also have people coming in for a $10,000 loan on a very high priced Rolex. And those people who may have shied away from a pawn shop in the past have no problem coming to our store, because we don’t look like a pawn shop. The location helps. We’re in a nice neighborhood with a performing arts theater and restaurants and activity. It’s as safe an area as any and people definitely feel comfortable coming into our store. We’re a jewelry store and it’s very discreet and fast and the biggest thing is that we’re trusted. People are comfortable leaving their valuables with us.
Q: Why do you say that pawning is fair lending?
Understand that I’m not making a loan on the person, I’m making a loan on the item. The most important thing is the item.
If you were selling an item, there’s a natural tension because you want the most for it and the buyer wants to pay the least for it.
But pawning is different from selling an item. Someone wants a loan, I want to give them a loan. We’re on the same side.
As a transaction, pawning is clean. We know where we stand. It’s on a piece of jewelry. I’m not asking for your credit history or judging your business plan. You’re not a bad guy if you never pick it up, you’re not a bad guy if you pick it up in a day. Cut and dry. It’s a personal interaction but the transaction‘s not based on anything personal. But there are a lot of personal stories attached to it. People pawn for all sorts of reasons.
Q: How do you arrive at a loan amount?
So when someone comes in for a pawn loan, often my first question is, how much do you need? When I ask how much they need, they are going to pay interest on that amount. So you might have an item that’s worth $10,000, but you only need $1000. Great. I’ll give you the $1000 and you’ll only pay $45 a month.
My motivation is to loan the most I can on an item and have you still come back and redeem it. Because I make interest. If I loan you too much, you won’t come back and redeem it – you essentially have sold it. If I loan you too little, I’m not getting much interest. So I’m on your side because it’s in my interest to give you a good amount.
Q: It sounds like you hear a lot of life stories in the pawn business.
Look, everyone has some time in their life they need help. But it’s not just about the money.
We help people a lot. I get blessed a lot by people who have medical expenses, I can’t tell you how many who say, God bless you, thank you, I’m so happy you were there to help me out. We helped them in an emergency and we saved them their valuables. People are not just pawning items that just have raw material value, they are pawning items that have sentimental value. So even if an item isn’t worth that much, to them grandma’s necklace is priceless. They’ll do what they have to do to get it back.
Q: So it is personal, in a way.
Look, the main reason someone comes to me for a loan is because they are comfortable bringing their goods to me. They trust that what they bring in, they will get back.
I think that says it. Thank you.
But if someone has more questions about pawning, they shouldn’t hesitate to call me at the store.
“My experience buying a pre-owned Rolex from Palisade Jewelers was perfect. I did the transaction by phone. The watch arrived, exactly as described; they gave me good, attentive service.”
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